The Story of Broke Response

Prof. Art Carden responds to “The Story of Broke“, a recent video by the creators of “The Story of Stuff.” In “The Story of Broke,” Annie Leonard claims that the government isn’t actually broke. Rather, the government just wastes resources on the wrong things like subsidies to the dinosaur economy and war. She claims that the government should change its ways, and instead, subsidize firms that will bring us the future we really want.

Art Carden agrees with Leonard that war and subsidies are wasteful, but is skeptical of notion that there is one unified vision for the future. To Carden, everyone has a different vision for the future. Our path to the future, he argues, is determined by the interactions of billions of unique individuals pursuing their own objectives.

Additionally, Carden questions Leonard’s distinction between bad subsidies and good subsidies. Every subsidy, deemed good or bad, must be allocated through the political process. Lobbyists and special interests exert a large degree of influence on political decisions, and they use this power to direct subsidies in their own favor at everyone else’s expense.

Carden concludes that government spending won’t buy a brighter future. A brighter future will emerge when people are allowed to spend money on things they care about. Put another way, positive change will come from billions of people cooperating freely and voluntarily with one another, not from pushing trillions of dollars through a broken political process.

The Story of Broke is a recent video by the creators of the Story of Stuff. In it, Annie Leonard says that the government isn’t really broke. She says we actually have plenty of resources to create the future we really want, but the problem is that the government is wasting those resources on the wrong things. I agree that the government is wasting resources on war and subsidies. War for example, diverts resources from production to destruction, and taking money from taxpayers and giving it to big businesses through subsidies and other programs is both wasteful and wrong. But I think she makes some important mistakes when she says that government subsidies to the right companies will get us a future we all want.

First, how can you argue that there is one vision of the future that we all want? It sounds great to say something like everyone should have access to a first-rate education, but who gets to define education? What books count as great literature? How much time should students spend on math? Should biology textbooks have warning labels? Should economics textbooks? You might think the answers are obvious, but there are probably honest and intelligent people who disagree with you.

Who gets to decide and how? A one-size-fits-all solution arrived at through a political process isn’t a solution at all. It’s just a decision made by bureaucrats and by politicians elected by some fraction of the voters. And there is no reason to think they’ll make the right tradeoffs.

Second, The Story of Broke proposes replacing bad subsidies with good subsidies. But how do we know who to subsidize? Governments have terrible track records when it comes to picking winners and losers. Without the prices, profits, and losses that markets generate, governments don’t have the knowledge necessary for wise choices.

People who watch The Story of Broke are told that jobs will be created by moving to alternative energy sources and bio-based materials, but when government has tried this in the past, with ethanol for example, it hasn’t really worked that well and there have been all kinds of unintended consequences. I agree that we should get rid of sweetheart deals and subsidies for oil companies and for the rest of what she calls the dinosaur economy, but replacing those with new, favored industries is just going to create new dinosaurs. It’s profits and losses, not government handouts, that will guide us toward more efficient energy sources.

There’s another reason to be wary of subsidies: they attract people who want free stuff from the government. If special interest groups and lobbyists are sharks, then the prospect of big juicy subsidies is blood in the water. Even if we agree on the goals, the incentives created by political distribution of goodies will draw people into the political game, resulting in transfers of wealth to powerful special interests. Once started, subsidies tend to grow. When our laudable goals aren’t reached, lobbyists and the politicians they have convinced say that it’s not a failure of the program but that we just need to spend more.

The Story of Broke assumes that power can and will be used wisely if it is concentrated in the hands of the right people. But power benefits special interests and hurts the rest of us. Indeed we’re in our current mess in part because of interventions that were supposed to build a better future by making housing and higher education more affordable.

The Story of Broke is right that we can build a better future if we stop wasting resources on war, subsidies, and special privileges for powerful people and powerful firms. But a better future doesn’t come from government spending. It comes from letting people decide for themselves how to spend their money on things they care about. It comes from billions and billions of people cooperating freely and voluntarily with one another. In other words, it comes from what people do in free markets.